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A Pooling Analysis of Two Simultaneous Online Auctions

  • Damian R. Beil


    (Stephen M. Ross School of Business, University of Michigan, Ann Arbor, Michigan 48109)

  • Lawrence M. Wein


    (Graduate School of Business, Stanford University, Stanford, California 94305)

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    Motivated by the ease with which online customers can bid simultaneously in multiple auctions, we analyze a system with two competing auctioneers and three types of bidders: those dedicated to either of the two auctions and those that participate simultaneously in both auctions. Bidding behavior is specified and proven to induce a Bayesian Nash equilibrium, and a closed-form expression for the expected revenue of each auctioneer is derived. For auctioneers selling a single item, partial pooling--i.e., the presence of some cross-auction bidders--is beneficial to both auctioneers as long as neither one dominates the market (e.g., possesses more than 60%-65% of the market share). For multi-item auctions, pooling is mutually beneficial only if both auctioneers have nearly identical ratios of bidders per items for sale; otherwise, only the auctioneer with the smaller ratio benefits from pooling. Pooling's impact on revenue decreases with the number of bidders, suggesting that popular auction sites need not be overly concerned with mitigating bidding across auctions.

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    Article provided by INFORMS in its journal Manufacturing & Service Operations Management.

    Volume (Year): 11 (2009)
    Issue (Month): 1 (October)
    Pages: 33-51

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    Handle: RePEc:inm:ormsom:v:11:y:2009:i:1:p:33-51
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    1. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Economics Series Working Papers 1999-W12, University of Oxford, Department of Economics.
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    6. Paul Milgrom, . "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Working Papers 98002, Stanford University, Department of Economics.
    7. Michael Peters & Sergei Severinov, 2001. "Internet Auctions with Many Traders," Working Papers peters-01-01, University of Toronto, Department of Economics.
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    9. Il-Horn Hann & Christian Terwiesch, 2003. "Measuring the Frictional Costs of Online Transactions: The Case of a Name-Your-Own-Price Channel," Management Science, INFORMS, vol. 49(11), pages 1563-1579, November.
    10. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-94, March.
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    12. Christopher Avery, 1998. "Strategic Jump Bidding in English Auctions," Review of Economic Studies, Oxford University Press, vol. 65(2), pages 185-210.
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